‘Moonshot’ education finance facility aims to turn $1 into $7 in LMICs

As global aid budgets shrink, the outlook for education in the world’s most vulnerable regions grows increasingly bleak. In low‑ and middle‑income countries, 6 in 10 children can’t read a simple text by age 10, and a staggering 251 million remain out of school — numbers that are unlikely to change without fresh financing models. But a glimmer of hope for education funding has emerged from Switzerland, where a small team has been working hard to operationalize the long-awaited International Finance Facility for Education, or IFFEd. After nearly a decade of planning, the innovative financing tool is now up and running, with new projects, partners, and donors on board. IFFEd’s founding CEO, Karthik Krishnan, said the facility is designed to unlock large-scale, affordable financing for countries most in need — targeting the widening gap between current education aid, which sits at just $16.6 billion, and the estimated $97 billion required annually to meet Sustainable Development Goal 4 of inclusive and equitable quality education 4. “Shrinking aid budgets don’t mean shrinking ambition. IFFEd’s smart aid approach gives us the means to do more with less,” Kishnan told Devex. First proposed by the Education Commission in 2016 and officially launched at the United Nations’ Transforming Education Summit in 2022, IFFEd aims to boost learning in lower-middle-income countries by mobilising more low-interest loans from multilateral development banks, or MDBs, for education and skills projects. Its bold financial model claims to turn $1 in donor funding into $7 in project finance. It focuses on lower-middle-income countries because they are home to nearly half of the world’s population but have difficulties accessing concessional and development finance, making them less likely to borrow for education and skills development, Krishnan explained. But by neglecting to invest in their human capital, these countries risk slipping back into low-income status. “Education is taking a back seat because it’s a silent crisis; it takes 20 years before it explodes in your face. But only investment in education will help a country go from being a lower-middle-income to a middle-income country,” Krishnan said. Having initially hesitated, the World Bank is now set to partner with IFFEd, joining the Asian Development Bank, which is already working with IFFEd in 10 countries across Asia to mobilize education and skills projects worth $500 million, with guarantees and grants from Canada, Sweden, and the United Kingdom. Partnering with the World Bank will enable IFFEd to expand its work into Africa, where the learning crisis is at its most critical. IFFEd is also in talks with the Islamic Development Bank, or IsDB, about joining forces. Adding further momentum, two sovereign states, including South Korea — the second is yet to be publicly named — have committed financial support to the facility, according to Krishnan. The World Bank is partnering with IFFEd to confront what it calls the “formidable challenge” of the global learning and skills crisis, which is compounded by “large gaps in education financing,” Luis Benveniste, the bank’s education global director, told Devex. “By multiplying the finance, making greater use of public and private partnerships, and investing limited capital in smarter ways, we want to achieve more for less, and deliver learning outcomes and the skills needed for future-ready workforces,” he added. Validation IFFEd’s recent momentum owes much to its 2024 credit ratings: AAA from Moody’s and AA+ from S&P Global Ratings — a first for a facility of its kind. For CEO Krishnan, the recognition offers “external validation” of IFFEd’s innovative financing model. “This isn’t just another global fund,” he said. “It’s a financial instrument — every dollar mobilizes $7 in projects.” That top-tier credit rating also proved pivotal in bringing the World Bank on board. By allowing donor guarantees to IFFEd to be treated as equity, it marked a structural breakthrough for IFFEd. Getting there wasn’t quick. The COVID-19 pandemic slowed progress, and building something at this scale required persistence. “When you’re aiming for a moonshot, it always takes longer than expected,” Krishnan said. “And IFFEd is a moonshot — it’s about shifting mindsets on how to do aid differently — and more efficiently.” Operating as an independent nonprofit foundation in Switzerland, IFFEd currently has a lean, agile structure of around 10 staff members, alongside a permanent board of directors. Gordon Brown, United Nations special envoy for education and former British prime minister, is honorary president. The model IFFEd’s innovative model hinges on the strategic use of donor guarantees to multiply the amount of money MDBs can raise in capital markets to finance education projects in lower-middle-income countries. Six months into the partnership with ADB, four projects and their investment cases are underway, spanning from early childhood development and nutrition, foundational learning, skills training, and job transition. IFFEd stretches donor dollars using strategic guarantees. Donors only pay a small fraction of capital upfront — if MDB loans default, the donor fulfills the shortfall, though in development finance projects, Kishnan pointed out that default is rare. The result? Every $1 in IFFEd guarantee helps mobilize $4 in financing. Blended with grants from donors and philanthropic funders such as the education-focused Jacobs Foundation, that multiplier grows to $7. The grant portion makes the loans roughly 10% cheaper than existing MDB loans to IFFEd countries. Down the line, IFFEd hopes to increase the grant ratio, Kishnan said. Administrative fees are covered by IFFEd’s own grant funding — and eventually by interest earned from its paid-in capital — ensuring that donor dollars directly support learning projects. “This is a very efficient way of doing development. IFFEd can unlock funding on a scale that’s never been done before,” Kishnan said. But the facility is about more than just increasing money for education. To ensure impact, IFFEd has also rolled out an “education impact strategy” — with support from the Jacobs Foundation — to guide project design, evidence-based implementation, and strong data measurement. “So IFFEd is not just a financial multiplier. It’s also about ensuring the money is invested in the right areas, in the right sequence, and executed well to ensure the right learning outcomes are in place,” Kishnan said. Critics Critics have raised concerns about IFFEd in the past, questioning whether it duplicates efforts by entities such as the Global Partnership for Education, or if it could worsen debt burdens in countries already struggling with repayment. “More than 50% of all low- and lower-middle income countries are now spending more on servicing their debts than on education. In a context where debt is becoming a major obstacle to the financing of education, offering new loans to finance education makes little sense,” ActionAid's David Archer told Devex. “IFFED is a distraction that gives power to bankers rather than national governments. We need the education community to focus on adding their voice to the case for debt cancellation and for creating a fairer global debt architecture through a UN Framework Convention on Sovereign Debt,” Archer added. Kishnan has responses to both the duplication and debt criticisms. First, IFFEd has been intentionally designed to be lean and focused — it's not aiming to compete with other financing mechanisms. Second, when it comes to debt, Kishnan views IFFEd-backed loans as “good debt” while underscoring the importance of incentivizing countries to borrow for education. “It is easier for countries to borrow for infrastructure or climate change because it will take 20 years for the impact of a child not being at school to be felt,” he explained before going on to add: “The brilliance of the model is that we make the debt even cheaper; if countries have to borrow to fund education — which even high-income countries do — then we make it even more concessional to help incentivise them to take a long-term view of their human capital development.” Lee Crawfurd, senior research fellow at the Center for Global Development, told Devex that while IFFEd’s claimed 1:7 leverage ratio could “sound almost too good to be true,” it’s important to remember that the new financing is loans and “that's where the leverage comes from.” And while this may increase debt, it’s worth it. “Investing in children is better value than almost any other investment, so making it easier for cash-strapped governments to spend more now is ultimately probably a good thing,” he said. The future Looking to the future, Krishnan described IFFEd as evolving, with a startup mindset that embraces adaptation and learning. The next frontier? Ensuring lifelong learning — helping not just children but also adults keep pace in a changing global economy. “In the 21st century, ensuring a 40-year-old stays employed through reskilling is one of our greatest challenges,” he said. Update, Sept. 18, 2025: This article has been updated to reflect that allowing donor guarantees to IFFEd to be treated as equity marked a structural breakthrough for IFFEd and that every $1 in IFFEd guarantee helps mobilize $4 in financing.